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25 Feb 2021 | 09:38

Inchcape confirms return to dividend as it swings to statutory loss

(Sharecast News) - Inchcape reported a 19% organic fall in group revenue in its final results on Thursday, to £6.8bn, on an organic basis, and a 27% decline on a reported basis. The FTSE 250 automotive distributor and retailer said revenue was down an organic 9% in the fourth quarter, improving from the 10% fall it saw in the third quarter.

Pre-exceptional profit before tax came in at £129m for the year ended 31 December, down from £326m in 2019, with the board reporting that 2020's result was supported by gross margin resilience in the second half when compared to the prior year.

Its statutory loss before tax totalled £128m, swinging from a profit of £402m in the prior year, and reflecting £257m of exceptional charges, which the board said were largely non-cash.

The firm said it had further strengthened its financial position, with net cash standing at £266m at year-end, up from £103m, and free cash flow of £177m in the year, down 17%.

Inchcape's directors confirmed a return to dividends, proposing a distribution of 6.9p for the year.

Operationally, it also noted its "continued shift" towards distribution, as it signed four new distribution agreements in the year, and made further retail disposals.

"Our 2020 results came in ahead of recently upgraded expectations, supported by increased resilience of demand for both vehicles and after-sales services in the fourth-quarter," said chief executive officer Duncan Tait.

"The group's inherently cash-generative business model contributed to the strengthening of our overall financial position during the second half.

"While the COVID-19 situation remains dynamic, as of today almost all of our markets are open. In many markets where we are facing restrictions, we are able to deliver vehicles, offer a click-and-collect service and to continue to perform after-sales services."

Tait said those capabilities helped the firm's top-line performance in the second half, and contributed to the operating margin recovery from the first half.

"In response to Covid-19, the group implemented a significant cost-restructuring programme.

"This is now substantially complete, and we are leveraging our leaner structure to build a better business for the future.

"In addition, we continued to rebalance our portfolio towards the more attractive distribution segment, securing new distribution business in both Americas and Europe, and further reducing our retail business."

Duncan Tait said Inchcape had "strong foundations", adding that the growth of distribution remained a central focus.

"As we enter the next phase of our journey, we will be supercharging certain elements - in particular, our use of data and digital - which will drive even faster growth of our distribution core.

"At the same time, we see significant opportunity to capture more of a vehicle's lifetime value - an area that is underserved by us today.

"This will in turn drive growth within our current footprint, and open up opportunities for even faster expansion in new markets, with both existing and new original equipment manufacturer (OEM) partners."

At 0920 GMT, shares in Inchcape were down 2.68% at 707p.
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